How to de-risk your portfolio
It’s important to limit the level of exposure to risky positions
Featuring: Jeff Brunton (Investment Director); Aaron Durkin (Global Head of Investment Risk and Performance) and Matthew Hopkins (Senior Portfolio Manager)
The past month has seen intense volatility, particularly across emerging markets, the banking sector and oil. In this video, we explore some of the risk management techniques that AMP Capital utilise to manage portfolios during turbulent times as well as the opportunities that this presents for portfolio strategy.
In this uncertain environment, it’s important to limit the level of exposure to risky positions. We continue to be cautious in adding to credit risk in the current backdrop as the acceleration in volatility in financial markets continues. Our preferences for exposures are to defensive or non-cyclical industries, with strong fundamentals and solid earnings growth.
A time of opportunity
Volatility always presents up opportunities for investors. When there’s stress in the market and investors are fearful, they tend to sell things – or are forced to sell things – often at more attractive prices.
From a portfolio strategy perspective this means:
- Preparing for volatile periods: stress testing and scenario analysis is an essential part of active investment risk management, particularly during stressed market environments where market dynamics can be changing quite rapidly;
- Adopting a rigorous investment process that’s repeatable: it’s important to be cognisant of valuations and sentiment in markets
- Taking advantage of buying opportunities